April Sales Slow Significantly

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May 1, 2007

New car sales dropped an estimated eight percent in April as a wave of negative sales numbers swept over the industry, tripping up Asian carmakers that had seemed invulnerable to downdrafts in the market.

General Motors, Ford,Toyota, Honda, Nissan, Subaru, Suzuki, Hyundai, and Kia all reported sales declines during April as a combination of flagging consumer confidence, a faltering housing market, sparse incentives, and rising gasoline prices all combined to slow sales.

It was the second consecutive month of falling sales and the third decline in the past four months, leaving industry analysts debating whether a weakening economy will lead to a steeper drop in sales later in the year.

Nissan sales dropped 14 percent, leaving the Japanese automaker with the dubious distinction of being the biggest loser during April.

Even Toyota, however, showed mortality last month. Ernest Bastien, Toyota’s vice president of sales operations, said on adjusted basis Toyota’s total sales increased two percent. Total sales, however, dropped 4.3 percent. Honda sales were down 1.6 percent on an adjusted basis and by nine percent overall.

Meanwhile, DaimlerChrysler moved back into third place in total sales, ahead of Toyota, even though Mercedes-Benz’s total sales dropped slightly. Chrysler posted a two-percent sales gain on what the company’s sales executives described as “well-organized” incentives and strong sales of the Jeep brand, which is being helped by the new Jeep Compass and Jeep Patriot.

The only Asian brand to defy the downward trend was Mitsubishi, which eked out a small sales gain. BMW and Audi also posted modest sales increases, while VW total sales increased on an adjusted basis but dropped slightly overall. MORE--

A downward trend?

Overall, new vehicle sales were down for the second straight month and for the third time in four months this year. Analysts had forecast the April slide, citing gasoline prices, a weak U.S. housing market, less-confident consumers, and a cutback in sales to rental fleets.

By and large, each automaker had pockets of strength, which bolstered its case that the decline over the past two months represented a modest adjustment.

George Pipas, Ford’s sales analyst, noted that the 13-percent sales drop posted by his company came against some relatively strong comparisons, while the overall rate of sales remains close to the company’s original forecast for the year. “On balance we’re seeing the profitability of our business improve,” he said.

Mark LaNeve, vice president, GM North American Sales, Service and Marketing, said that GM’s trucks sales were holding up well despite the pressures created by the stalled housing market.

"We are particularly pleased with the Silverado and Sierra pickups, and from January to March this year we've seen more than a four-point full-size pickup market share increase at the expense of Toyota, Ford, and DCX. Pickup truck customers are telling us in today's environment they are shopping for value, fuel economy, and warranty. GM wins on all three," LaNeve said.

"Fuel prices are again driving customers toward fuel-efficient vehicles," said Dick Colliver, executive vice president of American Honda. "The strength of small cars and crossovers like Fit, Civic, and CR-V underscores the prevailing consumer sentiment about fuel prices."

Bastien said Toyota’s small vehicles and hybrids did exceptionally well during April. Sales of the Prius, for example, increased by 72 percent as Toyota moved more marketing muscle behind the its top hybrid.

Paul Ballew, GM general director of market analysis, said overall the market for new cars remains relatively stable. Inflation is low, the economy is continuing to create new jobs and income is increasing, while vehicles have never been more affordable.

However, softness in the housing markets particularly in California, where sales may have dropped as much as 15 percent, and Florida have cut into the overall sales tally, he said.